Wash. House Democrats detail $760 million tax plan

OLYMPIA — State House Democrats want to raise about $760 million in taxes by closing a long list of sales and business tax exemptions and collecting more money from smokers, bankers, lawyers and accountants. The House tax plan, announced Monday, is the latest of three proposals from state leaders as they seek to bridge a $2.8 billion state budget deficit. Debate over the tax plans now heads toward high-pressure negotiations with Democratic Gov. Chris Gregoire and the Senate’s majority Democrats, with just 11 days left in the 2010 legislative session. The House proposal is nearer to the laundry-list approach favored by Gregoire and does not include a general sales tax increase, which was a central part of the Senate’s tax blueprint. House leaders said they tried to balance the need to preserve critical education and social services with worries that the wrong taxes could crimp a fragile economic recovery. “Our focus was on removing exemptions and closing loopholes,” said House Finance Committee Chairman Ross Hunter, D-Medina. “This approach makes sure everyone is doing their fair share in helping our state get back on its feet.” The House’s five-part revenue plan is four parts taxes, one part transfers from other state bank accounts. It starts with a $385 million package of closed tax exemptions that is focused on out-of-state consumers and companies, including banks and credit-card issuers. Another $163 million would be raised by spreading the sales tax to bottled water, custom software, candy, gum, plastic surgery and janitorial services. On top of that, the House wants to collect about $112 million by raising the cigarette tax by $1 per pack. Some $99 million would be raised through an array of “tax fairness” measures, including higher business taxes on lawyers, accountants and consultants, and on investment earnings by nonfinancial firms. The final piece of the House plan would grab about $100 million by raiding the state construction budget and proceeds from lottery games. That pushes the overall revenue package to $860 million. The Legislature’s overall budget plans also rely on hundreds of millions of dollars in spending cuts, federal aid and one-time accounting fixes. Republicans have staunchly opposed the Democratic drive for higher taxes, saying the majority hasn’t done enough to downsize government and cut state worker compensation. Democrats respond that they closed a $9 billion deficit last year without general tax increases, and they must raise some taxes while cutting further spending to ensure a balanced solution to this year’s budget woes. The $2.8 billion deficit represents the gap between current spending and expected tax collections in the state’s main checking account — called the general fund — through June 2011. Additional programs are driven by federal spending and separate accounts, and the state also maintains separate budgets for transportation and construction projects.